Creative Destruction


Creative Destruction Sigmoid S Diagram

“The seeds of our undoing are sown in the pinnacle of our success.” -Joseph Schumpeter

Organizations grow in a pattern, from the entrepreneurial stage (green) of a small startup to a larger entity through the management of resources and people and finally, to a complex organization focusing on efficiency and productivity (red). At this moment, every system in place sustains the status quo and resists radical innovation. This is called flat-lining. The sigmoid “s” suddenly starts to decelerate. This is where most organizations die—at the point of creative destruction.

At this moment of creative destruction, the organization needs to find a way to reinvent itself. All practices of the organization are intended to run a smooth and efficient operation and eliminate slack, but what they need is creativity and radical innovation, which require slack and variation. Unless the organization can make this jump, it destroys itself.

This is also apparent when we look at the reorganization efforts. A common mistake is to cut the organization diagonally, maintaining the same ratio. So nothing really changes. Instead, the organization needs to incorporate more green or blue or yellow or red, whichever arrangement will add more variance to their current situation.


Creative Destruction Common Mistake Diagram